The tax-exempt market was firmer Friday afternoon as secondary bids were well received and Jefferson County issued a first retail pricing for $1.8 billion of sewer revenue bonds.
"The spreads looked about where I thought they would come," an Atlanta trader said. "It's the cheapest credit besides Puerto Rico."
Citi held its first retail order period for $1.8 billion of Jefferson County, Ala., sewer revenue warrants. The senior lien bonds are rated BBB by Standard & Poor's and BB-plus by Fitch Ratings. The senior lien series holds insurance from Assured Guaranty Municipal Corp. with a rating of A2 by Moody's Investors Service and AA-minus by Standard & Poor's. The subordinate bonds are rated BBB-minus by Standard & Poor's and BB by Fitch.
The first series of $375 million of senior lien sewer revenue current interest warrants were priced at par to yield 5.5% in 2044, 5.625% in 2048, and 5.75% in 2053. Portions of bonds maturing in 2044, 2048, and 2053 were not offered for retail. The bonds are callable at par in 2023.
The second series of $55 million of senior lien sewer revenue capital appreciation warrants yielded from 6% in 2025 to 6.875% in 2036. Portions of bonds maturing between 2026 and 2035 were not offered for retail.
The third series of $70 million of senior lien sewer revenue convertible capital appreciation warrants yielded 6.5% in 2038 and 6.625% in 2042.
Yields on the fourth series of $837.4 million of subordinate lien sewer revenue current interest warrants ranged from 2.75% with a 5% coupon in 2015 to 6.5% priced at par in 2053. Portions of bonds maturing in 2042, 2051, and 2053 were not offered for retail. The bonds are callable at par in 2023 except those maturing in 2051 which are callable at par in 2018.
The fifth series of $56.4 million of subordinate lien sewer revenue capital appreciation warrants yielded 7.5% in 2028, 7.875% in 2033, and 8% in 2036. Portions of bonds maturing between 2029 and 2037 were not offered for retail.
The sixth series of $402.2 million of subordinated lien sewer revenue convertible capital appreciation warrants yielded 7.5% in 2044. Bonds maturing in 2039, 2047, and 2050 were not offered for retail.
In the secondary, bids were higher. "I am pleasantly surprised by the interest today," the Atlanta trader said, adding bonds maturing within 10 years are harder to buy. "It's follow up interest to the good reception on the new deals priced Thursday. It's not crazy busy but we are getting some business and the bid side is holding in and there is enough interest on attractive bonds."
On Thursday, the triple-A Municipal Market Data scale ended as much as three basis points firmer. The 30-year yield fell three basis points to 4.13%. The two-year and 10-year yields slid one basis point each to 0.33% and 2.61%, respectively.
Yields on the Municipal Market Advisors benchmark scale fell as much as six basis points on Thursday. The 10-year yield fell four basis points to 2.70%. The two-year and 30-year yields dropped three basis points each to 0.41% and 4.33%, respectively.
Treasuries were weaker after two consecutive sessions of gains. The two-year and benchmark 10-year yields rose two basis points each to 0.31% and 2.71%, respectively. The 30-year yield increased one basis point to 3.80%.
